Comcast makes case for TWC deal

Comcast laid out its arguments to federal regulators Tuesday for its $45 billion purchase of Time Warner Cable, saying a bigger company will actually increase competition in the television and broadband markets.

The two cable giants together “will bring to millions of households and businesses of all sizes the next generation of broadband Internet, video, voice and related technologies and services,” the company told the Federal Communications Commission in its public interest statement.

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“There’s been a lot of discussion as to whether big is bad, and sometimes when companies join together big can be dangerous,” Comcast Executive Vice President David Cohen said in a conference call. “But in this particular space with this particular transaction, we think big is very good.”

The statement to the FCC and a companion document filed with the Justice Department last week mark a significant juncture for the deal in Washington, kicking off the official start of the federal government’s review. Congress will begin to examine the deal’s effect on consumers Wednesday with a Senate Judiciary Committee hearing.

The deal would combine America’s two largest cable companies. If it wins approval for the transaction, Comcast would reach nearly one-third of the nation’s cable customers and between 35 to 40 percent of the nation’s Internet customers.

Even as Comcast made its case, critics of the acquisition cried foul. More than 50 consumer groups and other organizations sent a letter Tuesday to FCC Chairman Tom Wheeler and Attorney General Eric Holder, saying the deal is a bad idea.

“The question before the FCC is whether this deal serves the public interest. The answer is clear: A bigger Comcast is bad for America,” said Craig Aaron, president and CEO of Free Press, which signed the letter. “We need an Internet and video marketplace that offers people high-quality options at prices they can afford — not a near-national monopoly determining what we can watch and download.”

A key question for regulators reviewing the transaction is how they define the marketplace. Traditionally regulators have examined cable deals for their effect on competition in local markets, but the Comcast-Time Warner Cable proposal is likely to draw a new level of scrutiny because of broadband, which has become an increasingly important service to consumers nationally.

Comcast, in its statement to the FCC, tried to head off any opposition, saying there’s “no credible theory of harm arising from the transaction.” The company pointed to the different locations in which the two companies operate — as well as emerging broadband competition from companies like Google, which is building a fiber network in major cities.

“The point is Google’s coming,” Cohen said. “They are a company with global scale, with enormous resources, that is substantially larger than we are, and the business reasoning behind the transaction is that we also need the scale to compete with the Googles and other generations of competitors that are going to continue to flood the multichannel video marketplace.”

The cable giant also dismissed arguments made by Netflix CEO Reed Hastings, who has said that Comcast’s network neutrality rules are too weak and that new rules should cover so-called “peering,” or interconnection, agreements. The FCC is in the midst of rewriting net neutrality rules, which bar Internet-service providers from blocking or slowing Web traffic, after a court threw out key elements of the agency’s original policy. Netflix and Comcast agreed to an interconnection deal in February to allow smoother streaming of Netflix video.

“The argument that Reed Hastings makes in his blog that interconnection is a net neutrality issue is simply not accurate,” Cohen said.

Comcast has already announced plans to extend network neutrality principles — which it voluntarily adopted as part of its 2011 acquisition of NBCUniversal — and its low-income broadband program to the Time Warner Cable systems it acquires. The company has also proposed to spin off three million subscribers. These promises were reiterated in the statement.

Public Knowledge President and CEO Gene Kimmelman — a former Justice Department antitrust attorney — dismissed the case made by the company.

“This merger would give Comcast the incentive and ability to stifle competition, thwart innovation from online services, and impose higher costs on rival video and online services, which will eventually be paid for by consumers,” he said. “This merger would have dire consequences for innovative online service providers and for consumers.”

It’s not just liberal-leaning groups that have issues with the deal. A coalition of 13 conservative organizations including TheTeaParty.net and Let Freedom Ring also questioned the transaction, telling lawmakers competitive “market forces” are needed to develop new innovative products and push down prices.

The deal must win approval from both the Justice Department and the FCC. While Justice will look at the deal’s impact on competition, the FCC is charged with ensuring it’s in the public interest. The FCC generally carries out its review in public, and the Justice Department conducts its examination in secret.